Insurers Decrease Calif. Workers’ Comp Rates as Reforms Take Effect

Many workers’ compensation insurers doing business in California are decreasing their rates, evidence that the major reforms enacted last year are taking effect. Insurance Commissioner John Garamendi recently recommended that carriers decrease their workers’ comp rates by 18 percent, while the Workers’ Compensation Insurance Rating Bureau made a recommendation of 13.8 percent. Carriers responded by filing substantial rate reductions that will take effect after July 1.

State Compensation Insurance Fund, the quasi-public market leader, filed for a 14 percent decrease in its rates. State Fund has reportedly lowered its rates 26.2 percent since December 2003. Zenith Insurance Company filed for an average reduction of 12 percent, while Glendale, Calif.-based Employers Direct Insurance Company will lower its rates by 18 percent, meeting the commissioner’s recommendation. San Francisco-based CompWest plans on reducing its workers’ comp premiums by an average of 15.3 percent. This follows a midterm reduction of 9.9 percent that took affect on April 27.

“We looked at the continuing positive trends in underlying loss costs as well as the benefits that are beginning to take hold with a number of the reforms,” said Bill Mudge, president and CEO of CompWest. “We reviewed both the Bureau data as well as sent someone to the rate hearings to listen to the Department’s point of view and we felt that 15.3 was the appropriate reduction for us to take at this time.”

Garamendi said that workers’ comp costs have dropped 36.5 percent since 2003 and encouraged workers’ comp carriers to pass savings along to employers. “Many insurers have been slow to fully implement my recommended reductions and pass on the savings as rapidly as possible,” he said in a statement. “It is past time for the savings from reforms to be passed along to overburdened employers and injured workers.”

Nicole Mahrt, public affairs director for the Western Region of the American Insurance Association, was optimistic about the recent rate reductions.

“I think that’s what’s going on right now is very exciting, that we’re seeing really good rate decreases,” she said. “We’re finally seeing a healthy market, a stable system, a predictable system where people can properly price the product and so the insurers aren’t paying out $1.83 for every dollar they take in. Employers are really going to start seeing a difference.

“We’re really starting to see the tangible results from the historic reforms that were passed,” Mahrt continued. “But those rate decreases are also happening in an ongoing environment of uncertainty.”

Mahrt said that the California Applicant Attorneys Association is still actively trying to resist the implementation of the reforms with lawsuits and there is ongoing speculation about new talks to change recent permanent disability regulations.

“It’s hard to speculate what the future’s going to bring when we still have so much uncertainty out there,” she said. “But as long as the reforms are left in tact, insurers are passing the savings along to employers and their customers as soon as they possibly can. I think California’s system is far better off than it was two years ago. [It] used to be known as the worst system in the country. That’s not the case anymore.”